From the May 2003 issue of Investment Advisor • Subscribe!

May 1, 2003

The First Annual IA 25: 2003

Who are the most influential people in the financial planning profession?

Listing the most influential people within any profession is a daunting task, but the job is particularly difficult within financial planning, where fierce independence is prized but partnerships are the order of the day. The value you provide your clients centers on independence: Whether you're an RIA, broker/dealer rep, wirehouse broker, CPA, or attorney, you provide customized services that can include everything from preparing tax forms to providing life planning. But along with your independence comes a critical interdependence that guides you in picking the appropriate mutual funds, portfolio management software, custodian, B/D, and outsourcing partners.

That's the shape of the profession today--independence and interdependence. The people who made the grade for the 2003 IA 25, our list of the most influential people in financial planning, reflect that dichotomy.

We chose the members of the IA 25 because they are the heavyweights of the profession now and will remain so in years to come. They are the planners who have gained the respect of peers for their foresight, business acumen, and ethics. They are the academics who built the foundations of the profession, and the money managers who beat the S&P year in and year out. They are the CEOs and the regulators who keep them in check. They are the visionaries who built the partner businesses planners couldn't live without.

One honoree, Benjamin Graham, died in 1976, but his influence is as keenly felt today as when he walked the earth. Two other members, SEC Chairman William Donaldson and Smith Barney CEO Sallie Krawcheck, are still getting their feet wet. But each has a chance to exert their influence in ways that could be felt for decades to come.

You'll notice the absence of a leader of the FPA or the CFP Board. We considered several people from those organizations, especially those who were responsible for the 2000 merger of the IAFP and ICFP. We considered as well the executive directors of FPA and of NAPFA. We looked at a host of other planners, executives, money managers, and journalists. In future years, at least some of those are likely to make the list. But I expect you could argue with some of our choices. Indeed, I hope the IA 25 will spark a healthy dialogue. Just e-mail your comments to me at jgreen@ia-mag.com.

It was Sir Isaac Newton who wrote, "If I see further, it is because I stand on the shoulders of giants." You in the profession, and we who observe it, can be thankful for those giants whose names follow.--James J. Green

Harold Evensky

Harold Evensky is one of the most well recognized people in financial planning, and it's not just for his bow tie. Read almost any financial publication and sooner or later you'll find him quoted or you'll discover an article he's penned.

His thoughts have shaped the media picture of financial planning, and by extension, the public's view of the profession. The high media profile is good for his firm--Evensky, Brown & Katz in Coral Gables, Florida--but Evensky, 60, says it's also good for his education. "Talking to reporters is really good for you, because there are always a lot of challenging questions, and it forces you to stay up to date, or at least be comfortable defending your position," he says.

Evensky identifies two major trends that will benefit the consumer immensely: independent practices transforming themselves into businesses, and wirehouses transforming themselves from product-pushers to professional advisors. "The good news is that I think both sides are getting there," he says. "But it's not easy."--Karen Hansen Weese

Deena Katz

"Deena's books should be on every planner's shelf," says planner Linda Gadkowski of Centerville, Massa-chusetts. Plenty of planners agree, as shown by the popularity of Deena Katz on Practice Management and Deena Katz's Tools & Templates for Your Practice.

A former schoolteacher, Katz, 53, knows how to tell a story and teach a lesson at the same time. "Ninety-five percent of planning is the ability to explain complex things in an easily understandable way," says Katz, who is president of Evensky, Brown & Katz. Katz's considerable communication skills have gained her a following on the national and global industry-conference circuits, too.

Katz says the greatest challenge ahead will be managing expectations--not just clients', but her own, and the industry's expectations for its future. "We have yet to present ourselves to the public with one professional voice, and yet we're now reinventing ourselves again," she says, referring to the life planning movement.

She wonders, too, if some life planners are overstepping their bounds. "It's a fine line between coach/counselor and shrink," she says, "and I'm not sure we're educationally prepared."--Karen Hansen Weese

Ross Levin

If Consumer Reports rated cars based on only a single factor, its ratings would be useless. Yet when advisors measure their financial planning performance, they often fix on a single factor: investment returns.

Ross Levin, 43, of Accredited Investors in Edina, Minnesota, wrote The Wealth Management Index in 1996 to help advisors orient their attention to the broad range of wealth management issues. The book teaches advisors how to quantify clients' progress toward their goals in estate planning, asset protection, disability and income protection, debt management, and investment planning, and then explains how to compute a composite score that shows the client's relative success in achieving those goals.

Levin says the challenge he faces personally "is and has always been the same: Being a good husband to my wife, father to my children, planner for my clients, and principal for my staff, as I try to make a difference in the world." As for the industry, "I think the greatest challenge will be delivering great planning to those who need it but can't afford it," he says.--Karen Hansen Weese

Alan Greenspan

Federal Reserve Board Chairman Alan Greenspan is often called the second most powerful man in America, and filling his shoes (his term expires in 2004) won't be easy. Perhaps his most significant contribution during his 16-year reign at the Fed, says Brian Hamilton, CEO of Sageworks, Inc., a provider of technology products to financial services firms based in Research Triangle Park, North Carolina, is his "skill [at] making subtle adjustments to monetary policy that people can expect. Monetary policy can be anticipated, and business people can make long-term plans without them being disrupted." Geoff Bobroff, a financial services consultant with Bobroff Consulting in East Greenwich, Rhode Island, wonders if Greenspan's failure "to put the brakes on the economy" in the late 1990s will leave a lasting impression. "Someday people will look back and judge him as to whether or not his 'good' period of the early '90's was unfortunately wiped out by his 'poorer' period in the latter '90's."--Melanie Waddell

Michael Oxley

As a former attorney and special agent at the FBI, Rep. Michael Oxley (R-Ohio), chairman of the House Financial Services Capital Markets Subcommittee, knows how to root out the bad guys. His corporate reform bill, The Sarbanes-Oxley Act of 2002, is hailed as one of the most far-reaching laws ever to hit the financial services industry. "He's completely restructured, in a good way, corporate boards literally around the world," says Frank Kelly, head of Charles Schwab's Government Affairs Office. Now that he's dealt with corporate corruption, Oxley plans to hold oversight hearings throughout 2003 to investigate potential trouble spots within the investment banking, mutual fund, and hedge fund industries. "He's keeping the industry on its toes," Kelly says.

Oxley's committee pulls a lot of weight, overseeing the goings-on at the Federal Reserve, SEC, and the Treasury. And, as Kelly says, Oxley's "already established himself as one of the most powerful committee chairmen in Congress."--Melanie Waddell

Eliot Spitzer

In an April speech to state securities regulators, Richard Grasso, chairman of the New York Stock Exchange, called New York Attorney General Eliot Spitzer a "tireless campaigner for the consumer." Spitzer's investigations of shady stock research methods at Wall Street firms have "made a difference in investor confidence," Grasso said. Tom Grzymala, president and CEO of Alexandria Financial Associates in Alexandria, Virginia, concurs that Spitzer is "doing an excellent job" at trying to "restore America's faith in capitalism and create more transparency" in the markets. But Grzymala wonders, as do others, if political aspirations are fueling Spitzer's crusade. Indeed, the SEC's credibility problems have enabled Spitzer to overstep his authority. But that may change. "The SEC has to figure out how to wrestle the control of issues from the state regulators, like Spitzer and others, because the role [of regulating the markets] belongs on a more national basis," says Geoff Bobroff, a financial services consultant with Bobroff Consulting in East Greenwich, Rhode Island.--Melanie Waddell

William Donaldson

William Donaldson is faced with an awesome task. As the new chairman of the SEC, he not only has to restore investors' faith in the U.S. markets, but he has to battle morale problems within the commission. "It's a cultural shift," says Rick Cortese, VP of consulting at National Regulatory Services in Lakeville, Connecticut. As head of Wall Street's watchdog, one of his toughest challenges is proving that he's no longer part of the good old boy network. Ironically, perhaps his biggest asset is his Wall Street experience. "He knows the industry well, and knows how to operate within it," says Brian Hamilton, CEO of Sageworks, Inc. Yet another challenge for Donaldson, says Brooke Billick, VP and counsel at Marshall & Isley Trust Company in Milwaukee, is "recruiting appropriate staff members and retaining experienced ones."--Melanie Waddell

Charles Schwab

If all that Charles Schwab had done was to found a discount brokerage that loosened the wirehouses' stranglehold on stock trading, his place in history would be secured. But the 65-year-old chairman of Charles Schwab & Co., did not stop there. By building the first mutual fund supermarket and a low-cost, high-service platform for independent advisors, Schwab incubated the notion of truly independent advisors. "Until Schwab Institutional came along in the early 1990s, there was no platform for independent financial planners and investment advisors who targeted investors with portfolios in the $100,000 to $5 million range," wrote IA's Andrew Gluck in May 2002.

The fortunes of Charles Schwab & Co. have suffered during the bear market, and some advisors continue to nervously eye Schwab's intentions regarding the advisor channel. But many more of the 5,800 advisors who custody $220 billion at Schwab remain firm believers in the value of its products, its technology, and especially its referral program.--James J. Green

John Bogle

At an age when many people are settling down, John Bogle is still fighting the good fight. In March, the 73-year-old founder and former chairman of The Vanguard Group testified before Rep. Michael Oxley's subcommittee: "The [mutual] fund industry has moved from what was largely a business of stewardship to a business of salesmanship, a shifting of our primary focus from the management of the assets investors have entrusted to our care to the marketing of our wares so as to build the asset base we manage."

"Bogle introduced this concept that at the time was very foreign to most people," says Ben Warwick, CIO of Sovereign Wealth Management in Denver, "that you should look at cost" when it comes to evaluating an investment.--James J. Green

Don Phillips

Don Phillips is managing director of Morningstar, responsible for the Chicago company's corporate strategy, research, and investor communications. But for most advisors, Don Phillips is the public face and voice of Morningstar, a company that many advisors couldn't practice without. Phillips, 41, helped develop Morningstar's style box and star rating system, and eventually became CEO. But he is much more than just a numbers man. "Regardless of what Morningstar does in the future," says Richard Sincere, president of Sincere & Co, "Don will always be known for objectivity and integrity."--James J. Green

Todd Robinson

When Investment Advisor conducts its annual Broker/Dealer of the Year survey, we ask B/D reps to tell us what other broker/dealer they'd consider affiliating with instead of their own. LPL Financial Services always gets the most votes. In an industry filled with charismatic entrepreneurs who attract reps by force of reputation, 46-year-old Todd Robinson, chairman and CEO of LPL, stands out.

Robinson bought Linsco, a small brokerage, in 1985, and in 1989, he bought Private Ledger, another small broker. These days, LPL is not small: It has 4,600 reps and had 2002 revenue of $780 million. Robinson says that LPL and other B/Ds played a major role in helping shift registered reps from being considered "a sales outlet, a distribution channel, to being true advisors."

As for the future, Robinson voices concern that the regulatory pendulum has swung too far and that reps will be burdened with bookkeeping and filing requirements that will make their difficult jobs even harder. "We need to have a work environment and a compensation scheme that will reward good people," Robinson says.--James J. Green

Alfred West Jr.

If there's one clear trend in the investment advisor business, it's that advisors are looking to outsource everything from shredding services to money management while at the same time they feel the need to offer clients customized investing products and, increasingly, what you might call life planning services. That's where SEI and its chairman and CEO, Alfred West, fits in. Co-founded in 1968 by West as a technology outsourcing partner to bank trust departments, SEI these days is a public company that serves some 8,500 advisors at more than 5,000 firms, providing a separate accounts platform and host of back-office and other outsourcing services. Its headquarters in suburban Philadelphia is unique: cavernous "barns" filled with modern art where employees (including West) congregate around desks that are wired to the ceiling to facilitate frequent rearranging. "Everything we're doing is to foster creativity," the 60-year-old West says, a mentality that helps SEI to serve advisors.

What does the future hold? "Those advisors who want to provide everything" on their own to clients will have a harder time succeeding, he says, and "those who succeed will have to partner."--James J. Green

Mark Tibergien

What really pushes Mark Tibergien's buttons these days is the way many advisors fail to make the best use of their time and talents. Tibergien, a principal of the Seattle-based accounting firm of Moss Adams, speaks from experience. A 30-year consulting veteran and the author of the FPA's annual Financial Performance Study of Financial Advisory Practices, Tibergien, 51, stands out not only as an authority on the advisor business, but also as a ceaseless campaigner to make it better.

Tibergien (an Investment Advisor columnist) thinks too many advisors fail to leverage their practices properly in human terms. "So much of what an advisor does is dependent on himself or herself," he says. As advisors grow their practices, many add support staff, but they continue to focus the business around themselves. "They need to become more effective, not more efficient."

Tibergien is convinced that planning will remain an "unbelievably good business" for advisors looking to grow or merge with others. If Tibergien has it right, planning could turn out to be as lucrative as it is personally gratifying.--William Glasgall

Mark Hurley

Most asset managers tend to be quiet types. Not Mark Hurley, chairman and CEO of Dallas-based Undiscovered Managers LLC. He describes himself as "not a shrinking violet."

Hurley, 44, a West Point graduate and former Army captain who got to know the asset management business while at Merrill Lynch and Goldman Sachs, manages $478 million in seven mutual funds. But he has gained a reputation among planners as much for his two-part white paper, published in 1999 and 2000: The Future of the Financial Advisory Business. In it he warned of shrinking profit margins, heavy competition from wirehouses and banks, and a massive consolidation to come with only 40 or 50 megafirms surviving.

Things have not played out this way yet. But Hurley thinks the current bear market is already giving advisors a bitter taste of what's to come. Advisors "have gotten a taste of margin compression. They are suffering death from a thousand cuts."--William Glasgall

Bill Miller

As manager of the $6 billion Legg Mason Value Trust, Bill Miller has beaten the S&P 500 for 10 years straight. That's no mean feat in his corner of the stock market--large-caps--where companies are covered intensely by buy- and sell-side analysts and gaining an edge is exceedingly tough. "There are a handful of people in this industry that I think are good, and he is definitely one of them," says Mark Mulholland, president of the Matthew 25 Fund.

Miller attributes his showing to his contrary nature--and patience. "Bargain prices do not occur when consensus is cheery, the news is good, and investors are optimistic," he says. "Our research efforts are usually directed at precisely the area of the market that the news media tells you has the least promising outlook, and we are typically selling those stocks that you are reading have the greatest opportunity for near-term gain."--Megan L. Fowler

William Gross

"While the United States rules the waves as well as turf and sky, I'm not so sure that we are, or will be, the economic powerhouse we once were," Pacific Invest- ment Management Co.'s Bill Gross, manager of PIMCO Total Return Fund, declares on his company Web site. Investors should be placing their money in foreign opportunities.

"You feel that he marches to his own drummer," says Louis D'Avanzo, municipal bond fund manager with First Pacific Corp. in Honolulu. "He is one of the people who moves markets, but even before that, he had convictions and was willing to go against the grain of popular thought. And that is what has made him so successful."

The 59-year-old Gross sometimes wonders if the end of his run is near. "You know that little fable about flying too close to the sun?" he asks. "The easiest thing for me to do would be to call it a fine career." But that may not be for a while. "I think a manager makes a contribution to his industry by managing money efficiently and effectively and with an attitude towards allocating capital wisely," he says.--Megan L. Fowler

Bob Veres

For advisors looking for help with their practices, there is no shortage of folks willing to lend a hand. One who extends assistance willingly, and who has acquired a wide following in the process, is Bob Veres, the 51-year-old pony-tailed sage of Mars Hill, North Carolina. Publisher of the Inside Information newsletter, author of The Cutting Edge In Financial Services, and a contributing writer at the Journal of Financial Planning, Veres has become known for his sharp-edged and often controversial comments in defense of the independent, fee-based mode of advice.

But Veres contends that charging clients tidy AUM fees will become more and more difficult to justify for advisors who can't add alpha. Those who can't, he believes, may be forced to split financial planning off from investment management, and will choose to only offer the former, charging hourly fees or retainers.--William Glasgall

Andrew Gluck

There are other talented journalists covering this industry, but despite our admitted bias, Investment Advisor columnist Andy Gluck's influence has grown to where he now occupies a unique position.

After 15 years of news reporting, Andy began producing IA's news section in 1996 at the same time he started his own company, Advisor Products, which provides customized client newsletters for advisors as well as Web sites and other services.

Gluck, 46, built his reputation on technology. He understands how tech works and has long provided insights into how advisors can incorporate it into their practices. But he's also taken the next step: putting his knowledge of technology and how advisors work into context. He can explain how a new application will affect advisors' competitive positions, and he'll see the implications for their practice. His insight into the doings of planners' biggest partners provides a valuable service as well to readers. "Advisors sometimes don't know what they want, and I can tell them what they need because for 20 years I've been talking to advisors all the time," Gluck says.--James J. Green

George Kinder

Ask a hundred people for a definition of "life planning" and you'll get a hundred answers; ask them to name the person who has contributed most to its development, and chances are they'll say George Kinder.

As a co-founder of the Nazrudin movement, author of The Seven Stages of Money Maturity, and founder of both George D. Kinder Financial Services and the Kinder Institute of Life Planning, the 55-year-old Kinder has explored "a more holistic and integrated approach to the work of a financial advisor," says Olivia Mellan, therapist, author, and an IA columnist. While his emphasis on clients' psychological and spiritual connections to their money raises eyebrows in some circles, planners like Karen McIntyre of Spring House, Pennsylvania, express pleased recognition that Kinder's work "reinforces what I had known innately to be true--that financial planning is much more than quantifying goals and results."

The greatest challenge for planners, says Kinder, "is for each of us individually to model, as practitioners, the financial planning process and its questions. Are we living the life worth living, the life we aspire to?"--Karen Hansen Weese

Sheryl Garrett

Did you ever feel guilty for turning away a nice, friendly prospect just because she wasn't rich enough? Sheryl Garrett did--and then did something about it.

As if it weren't enough to build a successful firm based on the untried idea of offering financial advice by the hour for a fee to middle-income clients, Garrett, 40, went further: She created Garrett Planning Network, a group of advisors who are replicating her success by using the templates, processes, and educational resources she developed while building her own firm. In three years, the network has grown to include 130 advisors, and Garrett has become the poster child for the idea that there are "effective models for serving the broad masses of consumers, and profitably," she says. Advisors pay Garrett up-front and annual charges to join the network.

Garrett's program "puts planners through their paces, teaching them the hands-on, how-to skills they need but won't learn studying for the CFP," says Bernard Kiely of Kiely Capital Management in Morristown, New Jersey, who also recommends her book, Garrett's Guide to Financial Planning: How to Capture the Middle Market and Increase Your Profits. "A lot of people say that fee-only planning is only for the rich; she proves that's not true."--Karen Hansen Weese

Amy Domini

When the average investor decides to invest ethically, often he will turn to the work of Amy Domini. Creator of the Domini 400 Social Index and manager of the Domini Social Equity and Domini Social Bond funds, Domini put socially responsible investing on the map. "By buying better companies, we create a dialogue about what a better company is," she says. "That is the goal of screening. This used to be a much harder message to explain before Enron, but now it's a piece of cake."

"Her index, and later her funds, proved that social investing can go toe to toe with traditional investing," says Alisa Gravitz, VP of the Social Investment Forum in Washington, D.C. "Most Americans invest for their retirement. Social investing allows you to retire in a better world."

Domini first evaluates how much a company gives back to the community, becomes a responsible owner through deliberate proxy voting, and finally invests in smaller institutions like neighborhood banks to support community development. As the financial services industry struggles to regain its credibility, says the 53-year-old Domini, socially responsible investing can show the way.--Megan L. Fowler

Gary Schatsky

The National Association of Personal Financial Advisors is a group that some deride as too fervent when it comes to compensation and fiduciary duties. Moreover, its members are a contentious lot who seem to relish disagreeing with each other. However, they also support each other in setting high standards while struggling to make their practices better.

In a group boasting founding members like John Sestina, Peg Downey, and Lewis Altfest, and ably led now by Steve Kanaly and Michael Joyce, Gary Schatsky stands out. Not one to suffer fools gladly, Schatsky has been an effective public voice for fee-only planning through the force of his personality and his media savvy. The 44-year-old Schatsky, an attorney, was an early adopter of the fee-only approach. But it was as two-term chairman of NAPFA that Schatsky made his mark on the profession. "More than any other NAPFA member, Gary made a difference for NAPFA overall, particularly in how NAPFA looked at itself," notes Richard Sincere, president of Sincere & Co. and a longtime observer of the profession. Sincere says it was Schatsky who forced NAPFA members to decide what the group would be "when it grew up."

"Keeping ethics and standards at the forefront" is what Schatsky considers his greatest accomplishment, and putting the profession "at least at the level of medicine and law. We shouldn't be satisfied with de minimis standards." In a profession that he characterizes as still being "90% sales," Schatsky is proud to call his efforts "financial social work."--James J. Green

Sallie Krawcheck

Before the stock market bubble burst, the emblem of conflicted equity research was Jack Grubman, telecom analyst and dealmaker for Citigroup's Salomon Smith Barney unit. Now, in the wake of Grubman's ouster, CEO Sandy Weill is betting that tenacious outsider Sallie Krawcheck will steer his wirehouse back to the straight and narrow.

As chairman and CEO of Citi's securities unit, now known once again as Smith Barney, Krawcheck, 38, supervises an army of 350 analysts and 12,700 brokers. Her chief mission will be to make sure her firm's stock selections are driven by valuations and not investment-banking transactions. Says Krawcheck: "We have a real responsibility to regain the trust of the investor."

Krawcheck comes to her new job with impressive credentials--and a $16 million paycheck. Weill lured her away from her post as CEO of Sanford C. Bernstein, an independent research boutique catering to institutions and wealthy individuals. As a young analyst at Bernstein, Krawcheck had attracted attention for her critical coverage of financial-services stocks, winning the moniker "the Straight Shooter" from Money magazine.

Krawcheck says that on her watch, investment bankers will "have no input whatsoever on the compensation of research analysts. Their compensation will be based on the quality of their recommendations." She has also cautioned analysts that "we will operate with the highest ethical standards" while providing "meaningful investment insights" to clients. Reforming deal-driven analysis in the entrenched culture of a wirehouse is a tall order. But Krawcheck's task is vital to restoring Smith Barney's, and by extension, Wall Street's reputation.--William Glasgall

Benjamin Graham

In his preface to the fourth revised edition of Benjamin Graham's The Intelligent Investor, Warren Buffett says that he first read the book in 1950, at age 19. "I thought then," Buffett wrote, "that it was by far the best book about investing ever written. I still think it is." Few would argue with him. More than a quarter-century after his death in 1976, Graham's influence as the father of securities analysis in general and value investing in particular is as widely felt as when he published The Intelligent Investor in 1949.

Graham taught at Columbia University's graduate school of business from 1928 to 1957. But perhaps it was his undergraduate degree, from Georgia Tech, that propelled him to success, since "it would take an engineer to do what he did," says Ben Warwick, chief investment officer of Sovereign Wealth Management in Denver, who has written extensively on Graham's influence. "He brought a construct to a business that hadn't had one until then." Simply put, Warwick says Graham "was the first person to develop an objective evaluation tool for equities. Like John Maynard Keynes in economics, Graham added logic to the process."--James J. Green

William Sharpe

Among the incredible powers that technology has brought to advisors is the ability to use Monte Carlo simulation to map out the realm of financial possibilities a client may face. And among the pioneers in bringing this power from the mainframe to the desktop is William Sharpe.

Even before founding Financial Engines in 1996 to bring a Monte-Carlo-based planning application to consumers planning for retirement, Sharpe was legendary. The father of the capital asset pricing model, he shared the 1990 Nobel Prize for economics with Harry Markowitz and Merton Miller. His Sharpe ratio, a measure of risk-adjusted historical returns, is one of the building blocks of securities analysis.

Recently, Sharpe has moved Financial Engines into the advisory arena, arguing that planners need "good financial econometrics to model how markets work." They also need complex applications to chart the range of possible occurrences. "You have taxes to deal with, load charges, embedded capital gains," he says. "That's not something you can do with some little software package." But Sharpe admits that no one has yet figured out how to plug in real estate, often the single biggest asset on a client's balance sheet, into Monte Carlo applications.

Does the 68-year-old Sharpe go to a planner? "I use Financial Engines," he says. "I humor myself into thinking I can do a reasonable job on my own." When a Nobel Prize laureate is willing to eat his own cooking, you have to assume there are more than empty calories on the plate.--William Glasgall

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